Kailis Bros Pty Ltd v Clarke - [2020] NSWSC 1150

Supreme Court

New South Wales

Medium Neutral Citation: Kailis Bros Pty Ltd v Clarke [2020] NSWSC 1150
Hearing dates: On the papers
Date of orders: 27 August 2020
Decision date: 27 August 2020
Jurisdiction: Equity
Before: Darke J
Decision:
Declaration to be made that defendant granted a charge in favour of the plaintiff over his interest in a property.

Catchwords:
MORTGAGES AND SECURITIES – charges – plaintiff enters into trading agreement with company of which defendant is sole director – agreement provides for company and guarantors to charge their interests in real property to secure payments due under agreement – agreement executed by defendant – whether defendant executed only on behalf of company or also as a guarantor – defendant held to have executed for company and also personally as a guarantor – charge granted by defendant in favour of plaintiff

Legislation Cited:
Real Property Act 1900 (NSW), s 74K

Cases Cited:
Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
Aquawest Pty Ltd v Twynham [2017] NSWSC 652
Chan v Cresdon Pty Ltd (1989) 168 CLR 242

Category: Principal judgment
Parties: Kailis Bros Pty Ltd (Plaintiff)
Justin Troy Clarke (Defendant)
Representation: Solicitors:
Trinix Lawyers (Plaintiff)
DWF (Australia) (Defendant)

File Number(s): 2020/171117
Publication restriction: None

Judgment

These proceedings were commenced by Summons filed on 9 June 2020. The plaintiff, Kailis Bros Pty Ltd, a company registered in Western Australia, sought a declaration that it has a caveatable interest in a property at Thornton. The property is owned jointly by the defendant, Justin Clarke, and Mandee Clarke. The plaintiff also sought an order pursuant to s 74K of the Real Property Act 1900 (NSW) extending the operation of a caveat (AP631871) it lodged in October 2019 against the title to the property. The defendant had served a lapsing notice in respect of the caveat on about 25 May 2020.
The interest claimed by the plaintiff in the caveat is a charge said to be by virtue of a Credit Application and Guarantee and Indemnity dated 31 May 2019 between the plaintiff and the defendant. The caveat affects only the defendant’s interest as registered proprietor of the property.
On 12 June 2020 an order was made by consent extending the operation of the caveat until further order. Directions were also made for the defendant to file and serve any affidavits in opposition to the Summons, and for the parties to file and serve written submissions. No evidence was filed by the defendant. Further directions were made in relation to submissions on 10 July 2020, 7 August 2020 and 18 August 2020. In accordance with those directions, the Court has received submissions from the solicitor for the plaintiff, filed on 3 July 2020 and 14 August 2020, and from the solicitor for the defendant, filed on 15 July 2020 and 25 August 2020.
The parties agreed that it was appropriate for the matter to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NSWSC 1150
Decision Date: 27 August 2020

CaseChat Overview and Summary

Kailis Bros Pty Ltd initiated proceedings against Clarke, seeking to enforce a charge granted over certain properties to secure payments due under a trading agreement. Clarke, the sole director of a company that entered into the agreement with Kailis Bros, executed the charge. The dispute hinged on whether Clarke executed the charge solely on behalf of the company or also personally as a guarantor of the agreement. The primary legal issue for the court was to determine the capacity in which Clarke signed the charge document.

The court examined the terms of the trading agreement, the role of Clarke as the sole director of the company, and the nature of the charge agreement. It found that Clarke's execution of the charge was not limited to his capacity as the sole director of the company but also included his role as a guarantor of the agreement. The court reasoned that the agreement expressly provided for the company and guarantors to charge their interests in real property, and Clarke, by signing the charge, effectively bound himself personally. Therefore, the court held that Clarke executed the charge in both his capacity as the sole director of the company and as a guarantor of the agreement.

As a result of the court's decision, the charge granted by Clarke in favour of Kailis Bros was upheld. Clarke was held liable to secure the payments due under the trading agreement, both as the sole director of the company and as a personal guarantor. The court's ruling ensured that Kailis Bros could enforce the charge over the specified properties to recover the amounts owed under the agreement.

Orders